7 Myths About Credit Scores That Most People Believe
Considering how big of a role your credit score plays in your life, it’s surprising how misunderstood they often are. Many people still believe common myths about credit scores — even though they’ve been thoroughly debunked.
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Here are some of the most common credit-score myths people still believe:
Myth 1: You Need a Credit Card to Raise Your Credit Score
This is one of the most common myths. People believe that if you have a low credit score, you need a credit card to raise it. In reality, there are plenty of other options that can accomplish the same thing — with much less risk.
One option is to use a credit-building tool, such as Instal by CreditStrong, which can help improve your credit score in a short amount of time. The idea is simple: Instal will issue you a $1,000 secured loan, which means the funds will be secured away so you don’t have immediate access to them.
Each month, you’ll make payments toward the loan. CreditStrong reports the payments to the three major credit bureaus, which helps improve your credit score.
Instal also comes with free monthly access to your FICO score so you can closely monitor progress toward your credit score goals. Once you’ve paid off the full amount, the account is unlocked and you can withdraw the money. Your account will also be reported as paid-in-full with a $0 balance. Anyone can qualify — even those with no credit.
Myth 2: Closing Unused Credit Cards Will Boost Your Score
Lowering your number of credit accounts might seem like a good way to improve your credit score, but that’s not necessarily the case. In fact, it can have the opposite effect. Closing a card account reduces the amount of your total available credit, which can hurt your score by increasing your credit-utilization rate.
Myth 3: Checking Your Credit Report Will Hurt Your Score
If you’ve heard that checking your credit report will lower your score, you heard wrong. Checking your report has no effect on your score. As Experian noted in a blog, reviewing a credit report results in what is called a “soft inquiry” that doesn’t impact your score and is never a factor in credit-scoring models. In fact, checking your credit report at least once a year is a good idea to make sure everything is accurate.
Myth 4: A Higher Income Helps Your Credit Score
Earning more money might help your bank account, but it won’t help your credit score unless you use that extra money to pay down your debts.
Myth 5: Paying Off a Debt Removes Late or Missed Payments
This is the kind of myth that can actually hurt your credit score — especially if you think you can make up for a missed or late payment by paying off the entire debt on a later statement cycle. Late payments can remain on your credit report for up to seven years from the date you missed a payment, according to Equifax. Late or missed payments remain even after the debt is paid.
Myth 6: Your Spouse’s Credit Score Affects Your Score
One common misconception is that when you get married, your credit score will merge with that of your spouse. That’s not the case. There is no such thing as a joint credit score, only individual ones. Whether you’re married or not, your own personal credit history is yours alone.
The only time a marriage or legal partnership will come into play is if you open joint credit accounts. In this case, the accounts will appear on both of your credit histories.
Myth 7: A High Score Means You Automatically Get Approved for New Credit
Building a good credit score shows that you are responsible with money, but it doesn’t grant you instant access to loans and other credit. Many factors go into determining whether you’ll be approved, including your income. If you don’t earn a certain amount of money, then you won’t get approved for some loans no matter how high your score is.
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This article originally appeared on GOBankingRates.com: 7 Myths About Credit Scores That Most People Believe
